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Slovenia: Tax rate regarding transaction of property

VAT plays an important role in the sale of property by an entity that is a taxable person, therefore is obligated to charge VAT in pursuing its economic activities. In the Republic of Slovenia, VAT is regulated by the Value Added Tax Act.

In Article 5 of Value Added Tax Act there is a definition of a taxable person (taxpayer) and of economic activities, within the scope of VAT. Taxpayer is therefore a person who independently performs any economic activity anywhere, regardless of the purpose or result of performing the activity, and economic activity includes any production, processing, trade and service activity, including mining, agricultural and professional activity. Economic activity also includes the exploitation of property and property rights, if it is intended to achieve permanent income.

The seller must check whether the property is subject to VAT or not. The sale of property in the Republic of Slovenia is subject to two tax rates: general 22% VAT rate, applicable for most transactions, and a lower 9,5 % VAT rate, that is applied to apartments, housing and other facilities intended for permanent residence, and parts of facilities, if they are part of social policy, including  building, renovating and repairing them.

There are also few exemptions, such as plot of land, purchase of which is tax free, except for plots of land intended for the construction of buildings according to the municipal spatial plan (building plot of land) that is taxed at the general 22% VAT rate.

The sale of buildings or parts of buildings and the land on which the buildings are located is also exempt from VAT, unless the sale is made before the buildings or parts of the buildings are occupied or used for the first time, or if the sale is made before two years have passed from the beginning of the first use or the first moving in. If not, general 22% VAT rate is applicable, unless a lower 9,5 % VAT rate is applicable (depending on the type of building).It is important to note that the land on which the building stands on is not subject to independent VAT taxation, but is taxed together with the building.

However, if both the seller and the buyer are identified for VAT purposes and if the buyer is entitled to full VAT deduction in relation to the property, they can agree that this transaction will still be subject to VAT. Before the transaction is made, the two taxpayers must conclude a written agreement, which must contain at least a clear statement of will that they want the transaction to be taxed, the VAT identification number of the taxpayers, their role as contracting party and an indication of the property to which the agreement relates.

Before buying property, it is therefore recommended to be informed which tax rate will be applicable to the transaction, depending on the purpose for which the property is intended. In need of further information or help regarding the purchase of property in Republic of Slovenia, do not hesitate to contact the ALG partner in Slovenia – Odvetniška družba Završek & Šnajder o.p., d.o.o.

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